Following remarks by SEC chairman Gary Gensler that he is now looking forward to filings for Bitcoin ETFs, a number of bigger fund managers are now pushing forwards with plans. Gensler told the funds industry that the SEC was most favourably inclined to filings under the USS 1940 Investment Company Act, and ideally limited to CME-traded Bitcoin futures.
SEC remarks should provoke wave of listing applications
It is a cautious step in the right direction for the US regulator and one that we believe may lead to a re-think by the FCA in the future. With Bitcoin itself briefly climbing above the $50,000 parapet for the first time since mid-May, investors will be wanting to hear more about the prospects for ETFs that can deliver rapid access in and out of the market.
ProFunds, it should be noted, has already launched a Bitcoin mutual fund for US investors. The fund manager decided to report performance against the most stringent BTC settlement price available in US market hours, which raises the bar for other players in terms of the level of transparency being offered to investors.
Valkyrie Investments has Bitcoin ETF in pipeline already
One of the first fund managers to file has been Valkyrie Investments, based in Tennessee. It filed two months ago with the SEC for a futures-based ETF. This was a confidential filing initially, but its existence was revealed in the wake of Gensler’s remarks. CIO at Valkyrie Steven McClurg told Bloomberg his firm was favouring futures over physical Bitcoin as the underlying investment for the new ETF. He felt that a physical ETF was still a little way off.
Victory Capital is launching a multi-asset crypto ETF using the Nasdaq Crypto Index from CF Benchmarks. Its new product is the Victory Hashdex Nasdaq Crypto Index Fund for private US investors, but we understand an ETF following the same index is also in the works.
Outside the US other fund managers seem to be ahead of the curve. QR Asset has said it will be listing the first Ether ETF on the B3 exchange in Brazil. It is the first such ETF in the Latin American region and follows the firm’s successful BTC fund launch two months ago.
Over 20 unsuccessful applications to SEC so far
It should be noted that the SEC has yet to approve any Bitcoin ETF despite constant pressure from the asset management industry. Over two dozen filings have now been unsuccessfully submitted, according to Bloomberg Intelligence. First mover advantage is likely to be very beneficial for the fund manager that gets his/her ETF over the line, as they could accrue a nice share of the first wave of money into such a fund.
The other question will be which ETFs are reserved for expert/qualified investors and which will be made available for direct access by private investors. Given that there are already US mutual funds with cryptocurrency assets in their portfolios hitting the retail market, we can’t believe that Bitcoin ETFs will be kept out of the reach of smaller investors, especially if they are using the more liquid futures market.
Meantime other favourite vehicles for direct Bitcoin access like the Grayscale Bitcoin Trust (GBTC) is lagging behind spot prices at the moment, awaiting further investor enthusiasm.
